Real time network exchange with seller specified exchange parameters and interactive seller participation

ABSTRACT

Abstract of Disclosure 
     A system and method for networked exchange are disclosed.  A system for networked exchange comprises an internal proxy (140); an exchange processor (120) in communication with the internal proxy (140); a database (130) in communication with the internal proxy (140); an external proxy (150) in communication with the internal proxy (140); and, a communications network (110) connected to the external proxy.                        A method for networked exchange comprises 8 steps. Those steps are (1) specifying a mode of operations for an exchange; (2) identifying a commodity for the exchange; (3) listing information about the commodity; (4) accessing of the listing by a potential purchaser; (5) accessing the network-based exchange by the potential purchaser; (6) processing information generated by the potential purchaser, the information comprising a negotiation; (7) concluding the negotiation; and, (8) clearing the concluded negotiation.

Cross Reference to Related Applications

[0001] This application is a continuation of U.S. Application No.08/891,633 filed July 11, 1997, now U.S. Patent No. 6,058,379.

Background of Invention

[0002] This invention relates generally to the electronic exchange ofgoods and services via an electronic network and, more particularly, toa system and method for networked exchange.

[0003] All trade is based upon new needs brought on as a result of newtechnology--the advent of long term human habitats over the old style ofhunting and gathering brought about the need for trading for items whichwere not or could not be autonomously made. The need to establish a newtype of trading process, beyond the barter system, brought about anestablishment of a medium of exchange (e.g., money). This has evolvedover the ages into modern day commerce with monetary exchanges, stockmarkets, supermarkets, gas stations, flea markets, swap meets, etc.However, many of the globally employed systems may not be as efficient,or as fair as possible, since they rely on third party interaction orare based around a set market style or process. The utopian vision of amarketplace would be where the utility of the marketplace allowed for anindividual to achieve the most efficient and advantageous level oftransaction negotiation, fairest market value, protected and guaranteedclearing for a commodity or service.

[0004] Ancient people invented money by placing fixed values on certainitems such as shells, beads, stones, and even salt, with ingots beingthe most common form of money. Ingots were clumps of precious metal inno particular shape or size with their worth depending on their mineralcontent and weight. Their value was high because these metals were hardto find and difficult to mine. Ingots were not a panacea, though, andposed some problems for merchants even after being weighed. The greatestof these was determining true value because the content and purity ofingots varied. A partial solution for this dilemma was solved bystamping them with seals. Each seal displayed a description of the metalcontent, as well as a declaration of its weight. Even with the use ofseals, unscrupulous traders would shave some of the metal off the ingotfrom the opposite side from the seal, thus depreciating the value.Despite these incipient problems associated with development, the worldmonetary system has evolved from ingots and ancient coinage to wiretransfers, debit and credit cards and from primitive barter to currencyexchanges, stock markets and intertwined global markets.

[0005] The Internet and world wide web (WWW) provide the first truecontinuous world wide communications structure open to the individual.This allows for new ways to address global commerce. There are severaldifferent methods in which commerce may be implemented as there are avast variety of commodities and services that are in need of beingtraded. The concept of using the Internet as a marketplace or auctionforum is not particularly unique or difficult of an endeavor. Thecurrent technology of using E-mail and a telephone for notificationemployed by existing firms in closed environments has a rather low entrythreshold of complexity. This method can be duplicated quite easily andhas limited or no room for evolution. However, digital technology lendsitself quite readily to real-time high-volume transactions made bymultiple participants using shared information. Businesses are moving todigital technologies and this leads to a need to invent new technologyand processes to fill the utility.

[0006] Commerce systems over the Internet are known in the art. Most ofthese systems operate on a post and match process; that is, the systemswork by having a prospective buyer bid on an item, and if the bidmatches the seller's specified selling price, the item is sold to thebuyer. The bid and notification may not be processed in real time.Additionally, the seller does not have the ability to intervene once theexchange process has been initiated--once the offer for sale or exchangeis made, the seller is isolated from the transaction until it iscomplete.

[0007] Previous networked commerce systems do not allow a user to bidautomatically on an item. Thus, in order to stay apprised of what isbeing offered for sale, a person or a representative would have toremain on the network constantly. Additionally, most systems requireparticipants to be registered members of a system where sellers may berestricted only to merchants, and most rely on credit card transactions.It is difficult for a prospective buyer to search for the exact itemthat he is looking for without a considerable input of time. Finally, insystems that involve the sale of stocks, operations are still routedthrough a brokerage firm, and the system itself is essentially an orderplacing service.

Summary of Invention

[0008] It is an object of the invention to provide an improvedelectronic network-based exchange system that overcomes these and otherdeficiencies of prior systems.

[0009] It is a further object of the invention to provide such anexchange that operates and clears on a real-time basis.

[0010] It is a further object of the invention to provide such anexchange that provides flexibility, for example, to enable a seller todetermine the style and parameters of a particular exchange such aswhether the exchange is "open" or "closed."

[0011] It is a further object of this invention to provide a real-timeelectronic network-based exchange that is interactive, for example, toenable a seller to intervene at any time during the exchange process.

[0012] It is a further object of the invention to provide such anexchange that provides filtering (e.g., filtering of bid information) toensure compliance with predetermined criteria, to avoid unnecessary useof system resources and for other purposes.

[0013] It is a further object of the invention to provide such anexchange that enables classification and categorization of items to beexchanged to enable various search techniques and facilitate location ofitems of interest.

[0014] It is a further object of the invention to provide such anexchange that provides flexibility of a push or pull system.

[0015] It is a further object of the invention to provide such anexchange that provides a proxy with processing to provide security andconserve system resources.

[0016] It is a further object of the invention to provide such anexchange that provides an improved graphical presentation of exchangeinformation, such as current and/or past bid information.

[0017] It is a further object of the invention to provide such anexchange that provides advanced client-side functionalities andcapabilities, including artificial intelligence and agents stylebehaviors.

[0018] In order to accomplish these and other objects of the invention,an electronic network-based exchange system is provided that comprises aserver system for hosting transaction operations, and client terminalsconnected to the server via a communications network. Variousclient/server architectures may be used. The exchange host is operatedby an exchange operator. Sellers and buyers access the exchange to listitems and bid on listed items via client terminals. The server side ofthe system preferably comprises at least one database, an internalproxy, an external proxy, an exchange processor and a listing. Theclient side can be any suitable client terminal. Separate clientsoftware for sellers and buyers may be provided, or both may be providedtogether.

[0019] According to one embodiment of the invention, the system enablesthe capability to operate an exchange that is based on at least aneight-step capability. In step one, the mode of operation of theexchange is specified. In this step, parameters such as the start/stoptime for the exchange, the exchange's open or closed status, public orprivate access to negotiations, seller information, bid requirements,etc. may be specified. This may be done by the seller and/or auctionhost. Next, the proposed exchange item can be further identified. Thisinformation may include entering information about the item to be sold,which may include its classification, pricing information, etc. Next,the proposed item is added to an electronic listing. This may includeposting the information on a world wide web page. Next, on the clientside, a potential purchaser accesses the listing information. Forexample, the potential purchaser may view listed items. If desired, thepotential purchaser accesses the exchange. This includes the opportunityto "chat" (e.g., to electronically obtain additional information about alisted item or auction terms) and bid on a listed item. Next, if a bidis made, the client passes the bid information to the server side to beprocessed. This processing may include a first level of filtering todetermine if the bid meets predefined criteria or rates. If it does not,it is rejected. If it does, it is passed on for further processing. Forexample, it may be compared to previous bids to determine if it is thecurrent best bid. Additional bids can be similarly processed. Upon theoccurrence of some event, the opportunity for bidding on an item isconcluded. This may be done on an automatic basis, or it may be donemanually through transaction control. For example, transaction controlmay be exercised by the seller (e.g., when an acceptable bid isreceived). Upon conclusion of the bidding, a clearing process isperformed. Various clearing mechanisms may be used.

[0020] This system precludes traditional exchange market systems in thatit provides a vehicle in which the individual is empowered to circumventthird parties to ensure that exchanges are as fair as possible as wellas provide a mechanism to facilitate the migration of trading to theform and process it will take in the future.

[0021] A technical advantage of the present invention is that a systemand method for networked exchange is provided. Another technicaladvantage is that the invention provides real-time exchange to occurover a network. Another technical advantage is that the seller can setthe parameters of the exchange. Another technical advantage is that theexchange is interactive, allowing the seller to intervene at any timeduring the exchange process.

Brief Description of Drawings

[0022]FIG. 1 is a overall system block diagram according to oneembodiment of the invention.

[0023]FIG. 2 depicts the exchange process according to a preferredembodiment of the invention.

[0024]FIG. 3 is a flowchart of the internal clearing process.

[0025]FIG. 4 is a flowchart of the external clearing process.

[0026]FIG. 5 illustrates the bidding process according to one embodimentof the invention.

[0027]FIG. 6 is a system component layout diagram according to oneembodiment of the invention.

[0028]FIG. 7 is a system component layout diagram according to oneembodiment of the invention.

[0029]FIG. 8 illustrates an overview of the electronic auction phases.

Detailed Description

[0030]FIG. 1 is a block diagram of an electronic network-based exchangesystem according to one embodiment of the present invention. Preferably,the general architecture used is a client/server architecture.Client/server architectures, per se, are generally known. As shown inFIG. 1, the server side comprises an exchange provider 100, which mayfurther comprise at least one database 130, exchange processor 120,internal proxy 140, listing 160, and external proxy 150. Exchangeprovider 100 is connected to one or more clients 170 via network 110.

[0031] If desired, exchange provider 100 may include at least twoportions. In a preferred embodiment, exchange provider 100 consists oftwo portions. The first portion comprises an internal portion 101, whichmay include database 130, exchange provider 120, and internal proxy 140.The second portion comprises external portion 103, which may include thelisting 160 and external proxy 150. Internal portion 101 may beseparated by security means 102 from external portion 103. Securitymeans 102 may be a firewall or similar security providing device toprevent unauthorized access to certain portions of the server sidecomponent.

[0032] Database 130 is a primary data storage mechanism and communicateswith internal proxy 140. It is responsible for storing data and otherinformation relating to system operation. Such information may include,system parameters, item records, account information, exchangeaccounting information and other information. Database 130 may be anyconventional database, including multiple databases or distributeddatabases.

[0033] Exchange processor 120 is a controller that performs the functionof managing the exchange or auction. Any suitable controller may beused. Exchange processor 120 communicates directly with internal proxy140. It receives bids, processes the bids and reports out to theinternal proxy.

[0034] Internal proxy 140, which itself may be a server, may be used tosanitize, authenticate, filter and route communications (e.g., chat) andassist in the clearing process. Proxies, per se, are generally known.However, particular functions are performed by internal proxy 140. Forexample, internal proxy 140 communicates directly with database 130 andexchange processor 120, and may link the internal portion 101 toexternal proxy 150 or other components of the informal portion 103. Morethan one internal proxy 140 may be provided. Preferably, clients cannotdirectly access the internal proxy. Proxy 140 may be on a firewall.

[0035] Listing 160, which may be a database, web server or othersuitable mechanism provides information about items listed for exchange.Listing 160 is client accessible via external proxy 150 and network 110.One or more than one listing 160 may be provided per exchange.

[0036] External proxy 150 is responsible for security, filtering, androuting. External proxy 150 communicates with internal proxy 140,listing 160, and network 110. One or more than one external proxy 150may be provided per exchange. External proxy 150 prevents direct clientaccess to the internal portion 101. It may be used to prevent unwantedor undesired information from entering the exchange.

[0037] Network 110 may be any medium (wired or wireless) that allows forcommunications between components of the invention (e.g., clients andservers) and need not be homogeneous throughout the communications pathsof the invention.

[0038] A preferred embodiment of the invention operates according toFIG. 2 It is assumed that the host has been configured. In step 200, themode of operation of the exchange is specified. For example, it isspecified how the exchange will work and what rules it will work under.Information that may be entered during this phase may include, interalia, the start and stop time for the exchange, the categorization ofthe commodity (e.g., as either a good or a service), the aspects of theexchange that will be "open" and those that will be "closed," whetherthere will be public or private access to negotiations, and whether ornot seller intervention will be allowed. Other rules and terms may bespecified. This information is stored in the server and used to controla given exchange.

[0039] In step 205, commodity information is entered by the seller. Theterm commodity or item can include goods or services. This informationmay include identification of a new commodity or modification of anexisting listing by an authorized person. Such information may includesystem required administrative information such as exchange rules(parameters for that item) seller identification, identification of theitem, a major and/or minor classification, pricing information, andother terms. Other options available to a seller client include theability to search/list items, modify/remove items, intervene in anexchange (e.g., terminate bidding or an item listed by the seller),electronic chat, and reviewing the history/status of bids. If the clientselects viewing an item by identifier (e.g., an alpha-numeric), theclient may be prompted for the identifier that a particular item isassigned. The client may have retained this number from a previoussession, or may have received the number via accessing the listingservice. If the client enters a valid identifier, the buyer may be shownthe item, information about the item, or both.

[0040] In step 210, the listing information is made accessible to thepublic. This may include posting information on a world wide web pagethat the public can access. Additionally, an automatic identificationmay be used to send E-mail to potential purchasers. Other means ofmaking the information accessible may also be used. The listing itselfmay include historical data (a list of commodities traded or listed inthe past and associated transaction information), current listings andtheir status, and future listings (e.g., commodities scheduled to beoffered, but for which bidding is not yet permitted). The listing may besearched by fields, keywords or other search techniques.

[0041] In step 215, a potential purchaser or exchange partner accessesthe exchange via a client terminal. The purchaser client presents anumber of options. For example, the purchaser may search, obtainadditional information, perform electronic chat (real-time orstore/forward) bid and review (history/status). For example, the searchfunction may enable the purchaser to search through the listing foritems of interest. The purchaser may be provided with several fields ofinformation that can be used to facilitate the search. These searchfields may include classification (e.g., automobile, tool, furniture,etc.), price, terms or other fields or key words. The system may returneither an exact match, the closest match, or an entire classificationfor the client to browse through.

[0042] The client may have the capability of browsing through thedatabase using standard navigational tools. These options allow theclient to quickly advance and review through the database. Items may bedisplayed in various views and in various orders. Once a desired itemsis identified, the buyer may obtain additional information about thelisted item. For example, the client may be provided with a chat option.Chat enables electronic communication via the network and may providethe client with a real-time communication link with other buyers, theseller or the exchange host. Further, if the rules of the exchangeprovide, the chat may be either public (i.e., everyone viewing thatparticular item will be able to see the chat such as in a chat room) orit may be private (i.e., no one except the involved parties can see thechat). This option may be one of the exchange parameters.

[0043] Additional options may be provided to assist the client inmanaging the information. The client may be able to retrieve moreinformation about a particular item that is being viewed. This may beuseful when information for an item takes more than one screen topresent. It may also allow the client to send an E-mail containing allof the information about the particular item being viewed to an E-mailaddress.

[0044] The potential purchaser may make a bid on an item that iscurrently being viewed and the information is processed in step 220.Once bid is selected, the client may be provided with the currenthighest bid for the item, and a window entering the required informationfor making a bid. In order to be accepted, the bid must meet certaincriteria. For example, the bid must be higher than the current highestbid. The system may have rules in place that allow only predeterminedincrements (e.g., $0.50, $1, $10, etc.) depending on the particularestimated cost of the item. Same as all, rules can be enforced on theclient side and others can be enforced at the external proxy or internalproxy. This enforcement may also include the initial filtering ofinformation. For example, if a bid placed is not higher than the currenthighest bid, the client may not transmit the bid. Alternatively, thenon- qualifying bid may be dropped at the external proxy. Thus,unnecessary communications to the server are avoided.

[0045] In another embodiment of the invention, bids are not transmittedto the host if they are irrelevant. Irrelevant bids may be bids that areless than the current "best" bid. In order to determine if the bid isrelevant or not, the system determines what the seller's goal is (price,location, etc.) and then determines if the bid is more desirable to theseller than the current "best" bid. If it is, it replaces the "best" bidand the seller may be notified of the new highest bid. If it is not, thebid is disregarded. Notification may include a bid identifier, an amountand other information.

[0046] New "best" bids may be broadcast to all participants in theexchange. If a potential purchaser owns the "best" bid, he may also benotified of this status.

[0047] In step 225, the negotiations between the seller and all biddingparties are concluded. Negotiations may be concluded by expiration ofthe predefined exchange time, through seller intervention, through amatch being achieved or other events.

[0048] In step 230, clearing process is performed. This may be tied to aclearing bank.

[0049] Clearing may be done in several fashions. One implementation ofclearing is based on a simple process for modifying at least two items.The steps required in the actual process of modifying these items willbe described in detail later. Internal clearing occurs when there isvery little or no chance for the clearing process to fail, such as whenthe system directly controls all commodities in question. When there isinternal clearing, the integrity of every trade on the system isprotected at all times; that is, the system provides insurance or aguarantee of the trade completion. It is not possible for a participantto default after a trade is arranged. Since internal clearing isprocessed in real-time, the clients involved may proceed to the nextnegotiation immediately. External clearing occurs when at least onecommodity to be cleared requires dealing with external systems or wherethere is a possibility of failure during the clearing process.

[0050] Database 130 may have the ability to control the process ofinternal clearing. The present invention's implementation of clearing isbased on a simple process for modifying at least two items. Referring toFIG. 3, the database can ensure the integrity of a trade by using thefollowing process. First, in step 300, the system obtains the exclusiveright to modify lock on data record #1 and on data record #2. Thisensures that no process other than the internal clearing process canaccess the two data records. Next, in step 305, the system modifies therelevant data in each record. This may entail exchanging the informationbetween the two locked records. In step 310, the system releases theexclusive right to modify lock on data record #1 and data record #2. Thechronological order of the processes within a step is not significant,but each process of a step must be complete before moving to the nextstep and the steps must be completed in proper order.

[0051] If internal clearing is not available, or if it is not desired,external clearing may be used. Referring to FIG. 4, an overview of theexternal clearing process is given. First, in step 400, the systemobtains an exclusive right to modify lock on data record #1 and datarecord #2. In step 405, the system waits for one or more real-worldevents to occur. Real-world events may include a physical exchange ofobjects, a credit card validation, etc. Once this real-world eventoccurs, in step 410, the system modifies relevant data in each record.In step 415, the system releases the exclusive right to modify the lockon data record #1 and data record #2. At the completion of these steps,the external clearing process is complete.

[0052] In both situations, a third data record may be modified. This maybe done in order to account for the system's commission. The commissionmay be measured in several ways: it may be a percentage of the sellingprice, paid by the buyer or seller, or both; it may be a fixed amountpaid by the buyer or seller, or both, or may be any other suitable meansfor providing compensation. Based on the type of commission, data record#3, which may represent the system, is modified to include the amount ofcommission gained from this trade.

[0053] In addition to being internal or external, the clearing may alsobe direct or indirect. Direct clearing would be used when the items aredirectly transferred between the buyer's and the seller's accounts.Indirect clearing would be used when items are transferred to a thirdparty or placed in escrow.

[0054] Referring to FIG. 5, an illustration of the bidding processaccording to one embodiment of the invention is given. First, in step500, the client bids on the item. In step 505, the system checks to seeif the bidder is an authorized bidder. This may be based on the exchangerules set earlier by the seller. If the bidder is not an authorizedbidder, an error message 590 is returned to the client. If the bidder isauthorized, the process continues.

[0055] In step 510, the bid is checked to determine if it meets therules, e.g., if it is greater than the current highest bid plus apredetermined increment. There may be other rules for determiningwhether the bid is valid. In one embodiment, the increment may be solelybased on the bid on the item. For example, for items with bids of lessthat $100, bids may only be made in $1 increments; for items over $100,bids may only be made in $5 increments. In another embodiment, the bidincrement may be determined based on the seller's estimated value of theitem. In yet another embodiment, the increment may be set by the sellerregardless of the bid or value of the item. If the bid is not greaterthan the highest bid plus a predetermined increment, an error message isreturned to the client.

[0056] In step 515, the bid is transmitted to the seller or exchange.This may be done by electronic mail, by electronic messaging, or anysuitable method.

[0057] In step 520, the system determines if a concluding event hasoccurred. This may be an expiration of time, by an exact match, byseller intervention, or any other suitable event. Once this occurs, thesuccessful bidder is notified (step 525).

[0058] In another embodiment, the seller may have the option of notselling the item. This would allow the seller to retain control of hisitem should the best bid be unacceptable.

[0059] Once the bidder has been notified, the clearing process isinitiated in step 530.

[0060] The standard client 170 of the invention may employ variousgraphical user interface, or GUI, components, artificial intelligenceand agent-like behaviors for various functions. For example, a modifiedscroller is provided. In this modified scroller, displayed items movefrom one location to another, and depending on predetermined settings,the time may then either move off the display or be retained and remainvisibly present in the display. If the item is not retained, then thescrolling area of the scroller is adjusted to be smaller by the size ofthe retained item. If enough items are retained so that the remainingdisplay space is be insufficient for proper scroller display, then theretained items may scroll in order to accommodate the new item asnecessary. Both the active and retained scrollers are able to bemanually manipulated such that items that have been previously removedfrom the display may be brought back for a type of history reviewmechanism.

[0061] In a preferred embodiment, two scrollers may be linked orassociated with each other via some binding and may use this binding orassociation to help display information in a new and unique way. Thereare at least three presentations of this scroller. The firstpresentation, is where the scrolling is in a similar direction, andanother is where the scrolling is opposite direction. A center-outscroller, where the scrolling moves from the center to the outsides, mayalso be provided.

[0062] Any of these scrollers may have retained items as well. Dualscrollers may be extended to three or more scrollers linked by someassociation. These scrollers may also be in any orientation including anorthogonal perspective such as would be in a three dimensionalenvironment.

[0063] Security is provided for this system at different levels. Anysuitable means for providing security to the system may be used such asan encrypted stream-based network communication.

[0064] Referring again to FIG. 1, internal proxy component 140 also hasthe critical duty of handling communications with systems external tothe invention, and may employ additional security, protocols, andfilters. The proxy's filters are based on any field in the protocol, butprimarily will be based on the bid, ask, and item classification fields.It may be desirable to not have direct communication between client 170and exchange 120. All communication destined for exchange 120 is routedthrough proxies 140 and 150 to insure authorized and authenticatedcommunication.

[0065] The external proxy 150 has the ability to connect to externalsystems and retrieve information based upon an external protocol inorder to extract information that another component requires. Forinstance, the external proxy 150 handles incoming connections fromclient 170 using the invention's protocol, and it also has the abilityto handle incoming connections from other outside sources such asE-mail, CGI scripts, telephone, fax or secondary clients with secondaryprotocols.

[0066] An example of this is using a web page on the World Wide Web todisplay information about a lot for exchange. The external proxy 150 canthen extract appropriate information from the remote web page and passthis to listing service 140 which in turn will pass information todatabase 130 and exchange 120 as needed. The information that isrequired to be extracted is information that is sufficient to allow foran exchange to take place. This information is then embedded using theinvention's standard protocol so that it can be extracted. Therefore, itwould be possible to use the Hyper Text Markup Language (HTML) commenttokens to wrap the invention's required information.

[0067] Referring to FIG. 6, internal proxy 140 and exchange processor120 are provided with additional processing. Box A represents theadditional processing that applies to internal proxy 140. Theseprocesses may include a clearing processor, such as a clearing bank,electronic data interchange (EDI). Box B represents the additionalprocessing that applies to exchange processor 120. These processes mayinclude a partial matching processor, barter matching processor or apooling processor. One or more of the internal or external proxy can beused for, among other things, verification of authenticity of bids,validity of bids (based on rules), filtering of bids for price,status/time, item identification and required information. Preferably,the internal proxy handles more advanced functions, includingauthorization, identification and final verifications. A single proxymay be used if desired. Two proxies permit load balancing. Processingmay include routing of data and/or filtering, among other things.

[0068] Referring to Fig. 7, an example of how systems may interconnectis shown. In this embodiment, a plurality of exchange providers may beconnected via network 110. Exchange provider 100 may actually host theexchange, and a plurality of exchange providers 100 may interact vianetwork 110. Further, a plurality of clients 170 may be able to accessexchange provider 100 and participate in the exchange.

[0069] A preferred embodiment of this invention is an electronicauction. Referring to Fig. 8, an overview of the electronic auctionphases is given. The electronic auction is designed to emulate andsurpass a real-world auctions' functions and capabilities. First, instep 805, the preview phase represents the start of an auction. A lot,or an item, preferably will have been entered by this time and when theauction is started, and it is immediately placed in the preview phase.

[0070] In step 810, the activity phase includes a calling for bids. If alot is in this phase after a predetermined event and no bids areentered, the next phase is the settlement phase. If there is a bid, theauction moves to step 815, the first interval phase. This phase isprovided to give a gap between the activity phase and the auction phase.It provides time to prepare for the auction phase by placing a restingbid. No active bidding is allowed during this phase. As in step 805, ifthere is no bid on the lot, the next phase is the settlement phase.

[0071] In step 820, the auction phase represents the termination of theability of multiple bidders to bid in an individual auction. When thereare multiple concurrent auctions, the starting and stopping times may bestaggered based on factors such as, but not limited to, activity, bidvolume, price, or category. The schedule is posted when finalized, whichmay occur during the first interval phase. Any outstanding resting bidsare processed during this phase.

[0072] The second interval phase 825 is a gap between the auction phaseand the interface phase. A new resting, or maximum, bid may be enteredduring this phase for use as a fail-safe during the interface phase 830.There is no active competitive bidding during this phase.

[0073] The interface phase 830 is the phase where the high bidder fromthe auction phase may have the ability to further bid in a secondauction. If a resting, or maximum, bid was entered during interval 825or during the second interface phase 830, it is used as a fail-safeduring this phase in case of interface failure.

[0074] The settlement phase 835 is the phase where the results of eachauction are finalized.

[0075] A simple auction has only auction phase 820 settlement phase 835.Other steps are included in order to promote fairness and activebidding. Step 825 and 830 may be used only when there is a need to tie acomputer bidder to a second auction such as one hosted by a humanauctioneer or direct buyer to seller negotiation.

[0076] The following are example embodiments:

[0077] An alternate embodiment of this invention is a paperless,brokerless real-time concurrent point and click trading of Securitiesand Exchange Commission (SEC) listed stocks where individuals acting asan individual, broker, or broker/dealer may buy or sell registeredshares of stock without using a brokerage firm as an intermediary.Brokerless refers to the fact that participants are trading directlywith other participants without brokerage firm or other third partyassistance. Real-time means both the ability to offer shares of stockfor sale or to purchase shares, and the results of bids on these offersis processed nearly instantaneously and thereby known almost immediatelyby all exchange participants. The system will consist of real-time pricenegotiation between buyer and seller with a price matching mechanismwhen an offer to buy or sell is first entered. Trading is concurrent andinteractive for both buyer and seller. Both buyer and seller will usethe bidding mechanism to raise or lower bids and offers. Theparticipants may choose any listed item offering and place a bid if theywish to buy, or change aspects of their offering if they have offered tosell. This will allow electronic price negotiation between buyers andsellers, simulating the trading floors of the real-world exchanges. Whenan offer to buy or sell stock is first entered, a check is made by thesystem to see if there is a matching offer on the opposite side of thetrade. This match will be for the same stock at the same price intradable quantities. A similar check is made if an existing bid or offeron any shares of stock changes. If the system locates a match, a tradeis consummated. The exchange system will include an extensive databasefor customer and trade information. The system will maintain and providea record of all trades concerning the time of day, the parties involved,the price and number of shares traded, and any other information that isrequired such as required by a government regulatory agency such as theSecurities and Exchange Commission (SEC). A bid history will beavailable for any stock traded that will include the most recent offerand bid price, the price and volume of the last trade, and the previousday (or week) history. The system will provide real-time tradeinformation on a per-trade basis.

[0078] Another embodiment is the trading of "entertainment" stocks,options and futures. These stocks and options will be issued by thegoverning body of the trading floor on participants or entrants in real-world events. In no way will a stock or option indicate an ownership inthe entity that serves as the symbol or name (i.e., sport stock in theBuffalo Bills). The stock or option value is merely an indication ofperceived value derived by the trading floor members and market forcesin this particular forum.

[0079] Only members of this trading floor will be allowed to trade.Registration is required to become a member of the trade floor, andmembers are assigned an account number which are kept in the tradingforum's database. To commence trading, members must have sufficientfunds in their account to pay for the stock purchase. The system willpreclude any member from trading more stock or money than is in theiraccount.

[0080] The "entertainment" refers to the excitement created orenthusiasm generated by the media over the anticipated outcome of areal-world event. This event must have multiple entrants but only oneclearly-defined winner after a period of time. Small events may occurduring this time duration that may help define the eventual winner.These small events will stimulate the trading of the entrant's stock.Depending on the trader's perceived value of how an entrant is fairingin relation to other entrants, during the trade period, will determinethe value of any entrant's stock. An example of these events may includeindividual team games leading to a championship, political primariesleading to an election, or critic's review of Oscar-bound movies.

[0081] Stocks and options are issued in an initial offering of finiteamount at a par value by the governing body. This initial offering ofpar value stock will be sold to trading floor members at the beginningof the time duration for the real-world event. Options to purchasespecific amounts of stock from the governing body during the time periodmay also be issued. The proceeds of these sales will go into a dividenddepository that will be paid to the stock shareholders of the winningentrant, entrants, or combinations set by the specific rules for aparticular event. This dividend will be paid at the end of the timeperiod.

[0082] As each entrant's issue becomes more subscribed, that particularstock will be assigned a symbol and moved to the trading floor to betraded on by the trade floor members. Trading on a particular symbol isdone by either the owner of the stock offering to sell, or the governingentity may issue more stock on this open market. Trading will simulatereal-world stock exchanges in that both sides of a trade (buyer andseller) may raise, lower, or cancel offers to trade in real-time. Thetrading floor clearing mechanisms will clear all trades and debit andcredit the stock and money into the principal's accounts. Members may belimited to the amount of stock or the amount of money in theirindividual accounts.

[0083] When the winner of the real-world event is determined, thedividend is distributed according to the rules for this particularevent. If the real-world event is reoccurring, the stock holders may beissued stock options that allow them to purchase the same amount ofstock at the next issue at par value.

[0084] Another embodiment of this invention is a brokerless commodityexchange. The commodities traded may range from current contracts tradedover commodity exchanges, such as the Chicago Board of Trade, to newcontracts such as water rights, pollution credits, electric power, andpetroleum derivatives, or commodities such as commodities such asinformation (i.e., "data") such as breaking new stories or knowledgesuch as from knowledge modeling and information brokers or others suchas bananas, rubber, or computer chips. These commodity forums could beCFTC regulated, or independent.

[0085] The membership, trading, and clearing mechanisms for a commodityexchange are similar to the stock exchange embodiment. The differenceswould be in the nature of the commodities themselves as opposed tostocks. There may be commodities that require a physical settlement withno commodity exchange for money, or a cash settlement where no commoditychanges hands.

[0086] Another embodiment is a barter exchange. This barter exchange maybe based on a client-server system that provides real-time networkedforum for barter. The clearing of the barter between members of theexchange would be arranged completely by the participants for the trade.

[0087] All sides of the barter must be members of the exchange.Membership requires that the applicant use the barter exchange system tosubmit the application form that contains specific identification,background, and financial information. Once the applicant is granted anexchange membership, an account number is assigned. A member must havefunds or a line of credit established by a credit card available fordebiting.

[0088] Members may negotiate in real-time for items. Either side of atrade may offer to increase, decrease, add items, remove items, or doany variation of trade that one is able to do in the real world. Thiswill be accomplished by a listing function and a system priority chat.Anonymity will be preserved in forum until a barter is consummated. Uponthe system verifying and transferring the commission to the exchange,which is charged for use of the forum, the identification of theprincipals are revealed to each other. The principles may then arrangethe details of the exchange.

[0089] Another embodiment is an exchange for all types of domestic andforeign currencies and their derivatives. This could include arbitrageor direct swaps. Again, this exchange's membership, trading, andclearing mechanisms may operate in the same manner as the exchangesystem. However, differences may exist in the specific commodities thatare traded and minor adjustments may be made to account for theirparticular attributes.

[0090] Another embodiment is an on-line gambling forum. A digitalcalcutta is a method of wagering on sporting events that are of publicknowledge and generate interest. Calcutta wagering is based on anauction-style forum where all entrants of an event are auctioned to thehighest bidder. This auction may be for an individual event, such as anautomobile race, for a round, such as a golf tournament, or for a teamchampionship. The proceeds of the auction are placed into a pool to bedivided among the high bidders on the top four finishers in the event orround. There could be many calcuttas based on a single sporting eventbased on bid size, including minimum bid, maximum bid, and unlimitedbid, or pool size, including maximum pool, minimum pool, and unlimitedpool, or may be based on any combination of bids size and pool size. Thecalcutta could also be based on the split of high bidders on the highfinishers. The pool could be split among high bidders on several placesdown from the first-place winner.

[0091] The digital calcutta would serve as a mechanism for wagering onhighly publicized sporting events over a computer and network. Examplesmay include the Indy 500, the Tour de France, Wimbeldon, World Cup,Master's, Olympic events, college basketball (NCAA playoffs). News mediaoriginates the enthusiasm necessary for these events to be well-published throughout large portions of the world. This, in turn, createsinterest in wagering that could have a low entry level with a largepayoff in the foreseeable future. The electronic auction forum forwagering on these events could generate its own excitement.

[0092] Another application for computerized wagering based on theoutcome of real-world events is the use of a virtual interactive tradingfloor. This would allow the participants to become odds-makers and placewagers on any event they choose without going through an intermediary.The trading floor would provide a real-time forum for participants tonegotiate odds, point spreads, winners, or any other form of wagering.The only criterion is that there must be a definitive outcome and thatthe method to determine this outcome is agreed upon by both parties.

[0093] A participant must register to become a member of the tradingfloor and be assigned an account. Before the participant would beallowed to place or offer a wager, the total amount of funds or creditnecessary to cover this wager must be in his account. Once a wager ismade, the total amount involved may be placed in the trading floor'sdepository. If the participant used a line of credit issued by a creditcard, approval would be verified and the funds immediately transferred.The wager would be "locked" until the funds were transferred; this meansthat the participants could not reject the wager while the funds werebeing transferred. This transfer would take no longer than a fewseconds. If, for any reason, funds were unavailable, the bet would becanceled. Once the event's outcome is determined, the wager would besettled and the winner's account would be credited via the tradingfloor's clearing mechanism. A small commission would be paid to thetrading floor for every cleared wager.

[0094] If desired, artificial intelligence capability can be added tothe buyer client to enhance its capabilities. For example, the buyer mayuse software agents to automatically search for items to bid on, maymonitor bid status and/or closing items to automatically bid on items,without buyer intervention (subject to preset parameters by the buyer).Other functions can be added such as agent behaviors, single or multipleclients working together to address the market, and allow for the use ofdifferent sources of data such as on-line news tickers, informationbrokers and knowledge modeling databases. If desired, host-to hostcommunication can be permitted. Multiple item lots may also bepermitted.

[0095] In a preferred embodiment, a virtual online bank (VOB) may beprovided. The VOB may be used to provide convenience to the traders anccredibility to the exchange. Margin services may be provided by the VOBto a client based on a predetermined criteria. This predeterminedcriteria may include the results of a credit check, past tradingexperience, etc. A client may be provided the option of visiting the VOBat any time during the access to the exchange.

[0096] Although the present invention has been described in detail, itshould be understood that various changes, substitutions, andalterations can be made without departing from the intended scope asdefined by the appended claims.

Claims A method for operating a networked exchange in which a financialinstrument is traded from a seller to a purchaser by an exchangeprocessor comprising: said seller identifying said financial instrumentfor said exchange; specifying a mode of operations for an exchange; saidpurchaser accessing said networked exchange; said exchange processorprocessing information generated by said purchaser, said processinginformation comprising a negotiation between said seller and saidpurchaser; concluding said negotiation between said seller and saidpurchaser; and said exchange processor clearing said concludednegotiation. The method of claim 1 wherein said step of specifying amode of operations comprises: specifying a start time for said exchange;specifying an end time for said exchange; categorizing said financialinstrument for said exchange; specifying an access status for saidexchange; and, specifying a negotiations status for said exchange. Themethod of claim 1, wherein said specifying a mode of operations for anexchange is done by said seller. The method of claim 1 wherein said stepof said seller identifying said financial instrument to be tradedcomprises: said seller classifying said financial instrument; saidseller entering a price for said financial instrument; and, said sellerentering a goal for said exchange. The method of claim 1, furthercomprising: said processor listing information about said financialinstrument; and, said purchaser accessing said listing. The method ofclaim 5 wherein said step of said exchange operator listing informationabout said financial instrument comprises posting said listinginformation. The method of claim 5, wherein said listing informationcomprises: a description of said financial instrument; and, a bid startprice for said financial instrument. The method of claim 7, wherein saidlisting information is posted on a world wide web page. The method ofclaim 7, wherein said listing information is sent to at least onesubscriber. The method of claim 9, wherein said listing information issent by E-mail. The method of claim 5, wherein said step of saidpurchaser accessing of said listing comprises searching for informationabout said financial instrument. The method of claim 1, wherein saidstep of said purchaser accessing said networked exchange comprises:using a graphical interface to view said exchange; chatting about saidfinancial instrument to be exchanged; and, bidding on said financialinstrument to be exchanged. The method of claim 12, wherein saidgraphical interface is a scroller. The method of claim 12, wherein saidgraphical interface is a dual scroller. The method of claim 12, whereinsaid graphical interface is a three-dimensional scroller. The method ofclaim 12, wherein said chatting is between said purchaser and saidseller. The method of claim 12, wherein said chatting is between saidpurchaser and at least one other purchaser. The method of claim 1,wherein said step of said exchange processor processing informationgenerated by said purchaser comprises: filtering said informationgenerated by said purchaser; and, routing said information generated bysaid purchaser. The method of claim 1, wherein said step of concludingsaid negotiation between said seller and said purchaser comprisesmatching an offer by said purchaser to a goal price. The method of claim1, wherein said step of said exchange processor clearing said concludednegotiation comprises: obtaining an exclusive right to modify a lock ona first data record; obtaining an exclusive right to modify a lock on asecond data record; exchanging data in said first data record and saidsecond data record; releasing said exclusive right to modify lock on afirst data record; and, releasing said exclusive right to modify lock ona second data record. The method of claim 20, wherein said step of saidexchange processor clearing said concluded negotiation furthercomprises: modifying a third data in a third data record; said thirddata representing a commission. Computer-readable media havingcomputer-readable code embodied therein for networked exchange of afinancial instrument between a seller and a purchaser, saidcomputer-readable code comprising: means for identifying said financialinstrument for said exchange; means for specifying a mode of operationsfor an exchange; means for accessing said networked exchange by saidpurchaser; means for processing information generated by said purchaser,said means for processing information comprising a negotiation; meansfor concluding said negotiation; and means for clearing said concludednegotiation. The computer-readable media of claim 22, wherein said meansfor specifying a mode of operations comprises: means for specifying astart time for said exchange; means for specifying an end time for saidexchange; means for categorizing a financial instrument for saidexchange; means for specifying an access status for said exchange; and,means for specifying a negotiations status for said exchange. Thecomputer-readable media of claim 22, wherein said means for identifyingsaid financial instrument to be traded comprises: means for classifyingsaid financial instrument; means for entering a price for said financialinstrument; and, means for entering a goal for said exchange. Thecomputer-readable media of claim 22, wherein said means for processinginformation generated by said purchaser comprises: means for filteringsaid information generated by said purchaser; and, means for routingsaid information generated by said purchaser. The computer-readablemedia of claim 22, wherein said means for clearing said concludednegotiation comprises: means for obtaining an exclusive right to modifya lock on a first data record; means for obtaining an exclusive right tomodify a lock on a second data record; means for swapping data in saidfirst data record and said second data record; means for releasing saidexclusive right to modify lock on a first data record; and, means forreleasing said exclusive right to modify lock on a second data record.The computer-readable media of claim 22, wherein said means for clearingsaid concluded negotiation further comprises means for modifying data ina third data record; said data representing a commission. The method ofclaim 1, wherein said financial instrument comprises a stock. The methodof claim 1, wherein said financial instrument comprises an option. Themethod of claim 1, wherein said financial instrument comprises a future.The method of claim 1, wherein said financial instrument comprises asecurity. The method of claim 1, wherein said financial instrumentcomprises a currency. The method of claim 1 further comprising usingsoftware agents to automatically search for financial instruments to bidon. The method of claim 1 further comprising using software agents tomonitor bid status to automatically bid on financial instruments withoutpurchaser intervention. The method of claim 1 further comprising usingsoftware agents to monitor closing items to automatically bid onfinancial instruments without purchaser intervention. Thecomputer-readable media of claim 22, wherein said financial instrumentcomprises a stock. The computer-readable media of claim 22, wherein saidfinancial instrument comprises an option. The computer-readable media ofclaim 22, wherein said financial instrument comprises a future. Thecomputer-readable media of claim 22, wherein said financial instrumentcomprises a security. The computer-readable media of claim 22, whereinsaid financial instrument comprises a currency. The computer-readablemedia of claim 22, wherein said computer-readable code further comprisesmeans for automatically searching for financial instruments to bid on.The computer-readable media of claim 22, wherein said computer-readablecode further comprises means for monitoring bid status to automaticallybid on financial instruments without purchaser intervention. Thecomputer-readable media of claim 22, wherein said computer-readable codefurther comprises means for monitoring closing items to automaticallybid on financial instruments without purchaser intervention.